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Mexico Posts Record-High Trade Surplus Even After Nafta Redo

(Bloomberg) -- Mexico posted its highest trade surplus on record in December despite efforts by U.S. President Donald Trump to reduce the nation’s shipments to his country by redoing the North American Free Trade Agreement.

Mexico, which sends the vast majority of its exports to the U.S., saw its surplus soar to $1.8 billion, the most for any month since data has been collected in 1999. Automotive exports rose 7.4 percent from a year earlier to $11.5 billion dollars, while oil-product imports fell 15.5 percent to $1.38 billion.

After more than a year of negotiations, Mexico, the U.S. and Canada signed their new trade deal in November known as USMCA. Trump had threatened to cancel Nafta if Mexico and Canada couldn’t reach a deal that he said would bring the countries closer to balanced trade. The legislative bodies of all three countries still need to ratify the new agreement.

"Car production and demand has recovered amid less uncertainty over Nafta," said Marco Oviedo, chief Mexico economist at Barclays. "It seems that the new deal implies business as usual and that car exports should continue to be an important component of trade between the U.S. and Mexico."

On the other hand, domestic demand appears to have weakened at the end of the year, he said. "Domestic demand seems weak while the new government is reducing oil imports."

Mexico reduced gasoline imports by 14 percent in December from a year earlier, according to Petroleos Mexicanos. President Andres Manuel Lopez Obrador, who took office Dec. 1, temporarily shut off gasoline pipelines to prevent theft and began distributing the liquid via tanker truck, which slowed distribution and led to a bottleneck at seaports for vessels carrying fuel to import to Mexico.